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Form 8990: Limitation on Business Interest Expense Under Section 163(j)
IRS Form 8990 is used to figure the amount of business interest expense a taxpayer can deduct and the amount to carry forward to the next year, governing taxpayers subject to Section 163(j). A change allows an add-back for depreciation/amortization/depletion for tax years beginning after 2024.
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IRS Form 8990 - Limitation on Business Interest Expense Under Section 163(j)
IRS Form 8990 is used to figure the amount of business interest expense a taxpayer can deduct and the amount to carry forward to the next year, governing taxpayers subject to Section 163(j). A change allows an add-back for depreciation/amortization/depletion for tax years beginning after 2024.
Risk Radar
Scan points- 1If making a safe-harbor election for a CFC group, ensure *each* designated U.S. person makes it.
- 2Failing to complete Schedule A when required for partners in a partnership subject to Section 163(j) limitation.
- 3Not checking the “Yes” box on line D of the stand-alone applicable CFC’s Form 8990 if it is an applicable CFC.
- 4Omitting Worksheet C when making a safe-harbor election for a standalone Applicable CFC.
- 5Failing to complete Part I before determining allowable business interest expense.
Plain English
This form determines how much of your business interest expense you are allowed to deduct in the current year. If you have more eligible interest expenses than this limit, the remaining amount is carried over to be used in future tax years. The calculation depends on your business income and specific financing details.
Submission Date
- Filing date: 2026-01-21 17:10:36
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when a taxpayer (including an individual, corporation, partnership, or S corporation) has business interest expense, a disallowed business interest expense carryforward, or excess business interest expense from the current or prior year.
- Do not use Form 8990 when filing for a pass-through entity that allocates excess taxable income or excess business interest income to its owners unless it must file regardless of whether it has any interest expense.
- Check Form 5471 instead when the form relates to an information return for a foreign entity.
Form selector
Use this form or another form?
A partnership must file Form 8990
Line 2, which tracks disallowed business interest expense carryforwards from prior years, does not apply to partnerships.
✓ Confirm the form is being completed for a partnership entity.
An individual or corporation must file Form 8990
The general rule requires filing if the taxpayer has business interest expense or a disallowed carryforward.
✓ Check if an exclusion from filing applies to your specific situation.
A C corporation owns an interest in a partnership
Any investment interest expense allocated to this C corporation is treated as business interest expense of the C corporation from a non-excepted trade or business.
✓ Verify that the allocation method aligns with IRS guidelines.
A pass-through entity allocates excess taxable income/interest
The entity must file Form 8990 regardless of whether it reports any interest expense in the current year.
✓ Confirm the entity meets the definition of a pass-through entity.
A regulated investment company pays Section 163(j) interest dividends
This specific type of taxpayer must file Form 8990, referencing Regulations sections 1.163(j)-1(b)(22)(iii)(F) and 1.163(j)-1(b)(35).
✓ Check if the dividends paid meet the criteria specified in those regulations.
Deadline or filing window
The calculation on line 31 dictates the allowable deduction for the current tax year and carries over to line 2 of the subsequent Form 8990 (unless the filer is a partnership). The instructions do not specify an initial filing deadline date, but the form must be completed before filing the return.
Checklist
What you need before filling it out
Business interest expense limitation
The sum of Business interest income, Applicable percentage of ATI, and Floor plan financing interest expense · Instructions p.1
Taxpayer type (Individual/Corp/Partnership)
Determine if you are an individual, corporation, partnership, or S corporation subject to the limitation · Instructions p.1 / Form p.1
Prior year carryforward (Line 2)
Enter the amount from Line 31 of the prior year's Form 8990 · Instructions p.9 / Form p.1
Foreign Entity CFC status
Determine if the foreign entity is a Controlled Foreign Corporation (CFC) group member and if it made a safe harbor election · Instructions p.1 / Form p.1 (Lines B & D)
Allocation basis
Use the asset basis approach to allocate interest expense and income · Instructions p.5
Before you submit
- 1Verify that all required taxpayer name(s) are listed on Form 8990.
- 2Confirm the Identification number matches your tax return exactly.
- 3If filing for a foreign entity, ensure you have entered its Name and Employer identification number (if any).
- 4Check if the foreign entity is a CFC group member by answering Line B correctly.
- 5Determine if this Form 8990 is filed by the specified group parent for an entire CFC group by checking Line C.
- 6If applicable, confirm whether a CFC or CFC group made a safe harbor election on Line D.
- 7Ensure that interest expense allocated to a trading partnership partner who does not materially participate is excluded (Instructions p.9).
How to file this form
- 1Allocate and apportion your interest expense, income, and other tax items between excepted and non-excepted trades or businesses using the asset basis approach.
- 2Enter the prior year disallowed business interest expense carryforward on Line 2 of Form 8990 (if applicable to your entity type).
- 3Calculate the allowed deduction amount by summing Business interest income, Applicable percentage of ATI, and Floor plan financing interest expense.
- 4Complete all required CFC group lines (A through D) based on foreign entity status.
- 5Sign Form 8990 before sending it to the IRS.
- 6Keep a copy of the completed Form 8990 for your records.
- 7Attach Form 8990 to your timely filed tax return.
Known limitations
- 1A taxpayer does not generally need to file Form 8990 if it only has interest expense from an excepted trade or business, such as providing services as an employee, electing real property trade or business, electing farming business, or certain regulated utility businesses.
- 2A pass-through entity is not required to file Form 8990 if it is a small business taxpayer but must provide information upon request by a partner or shareholder who is required to file the form.
- 3A trading partnership must bifurcate its interest expense from a trading activity between partners that materially participate and those that do not, as only the portion allocable to materially participating partners is subject to limitation under Section 163(j) at the partnership level.
Field map
Compact field-by-field guide
Entity Info
1 items
Name and taxpayer ID of the entity claiming the credit.
Credit Info
1 items
Type of credit or incentive being claimed.
Calculation
2 items
The base amount used to calculate the credit.
Calculated credit amount after applying formulas and limitations.
Certification
1 items
Detailed breakdown supporting the credit calculation.
Signatures
1 items
Sign and date the form.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is Revision December 2025, and users should check IRS.gov/Form8990 for the latest information regarding Form 8990.
What changed or needs a fresh check
- Edition date — confirm the revision date reads December 2025.
- Form number — confirm the form number reads 8990.
- Taxpayer name(s) — ensure the name(s) match those shown on your tax return.
- Identification number — verify this matches the identification number listed on your tax return.
Quick Facts
Downloads
After you file
- 1Keep a copy of Form 8990 after filing.
- 2The form helps determine the amount of business interest expense that can be deducted and the amount to carry forward to the next year.
- 3If excess business interest expense is disallowed for the tax year, it must be carried forward to the following year as a disallowed business interest expense carryforward.
- 4A pass-through entity required to file Form 8990 must provide certain information upon request from an owner who is filing their return.
Sources
- SRCInstructions p.1 — Form 8990 is used to figure the amount of business interest expense a taxpayer can deduct and the amount to carry forward to the next year.
- SRCInstructions p.1 — The business interest deduction allowed for the tax year is limited to the sum of: Business interest income, Applicable percentage of the adjusted taxable income (ATI), and Floor plan financing interest expense.
- SRCInstructions p.1 — A taxpayer must generally file Form 8990 if they have business interest expense or a disallowed business interest expense carryforward.
- SRCInstructions p.1 — A pass-through entity must file Form 8990 regardless of whether it has any interest expense, provided it allocates excess taxable income or excess business interest income to its owners.
- SRCInstructions p.3 — An electing real property trade or business may elect not to be subject to the section 163(j) limitation if engaged in activities described in section 469(c)(7).
- SRCInstructions p.6 — A trading partnership is required to bifurcate its interest expense from a trading activity between partners that materially participate and those that do not.
- SRCInstructions p.1 — Future developments for Form 8990 are available at IRS.gov/Form8990.
Common confusion points
Do I need to file Form 8990 even if my business interest expense is zero?
A pass-through entity must file regardless of whether it has any interest expense, provided it allocates excess taxable income or excess business interest income.
→ Check the filing requirement for pass-through entities first.
What happens when a trading partnership files Form 8990?
The partnership must bifurcate its interest expense from a trading activity between partners who materially participate and those who do not, and only the portion allocable to materially participating partners is subject to limitation at the partnership level.
→ Review instructions regarding 'trading partnerships' for specific bifurcation rules.
How does an affiliated service group file Form 8990?
All members of an affiliated service group must be treated as a single person when determining filing requirements and gross receipts tests.
→ Confirm all related entities are included in the scope of the filing entity.
When do I need to apply the Gross Receipts Test for filing?
The general rule requires applying the gross receipts test, similar to corporations/partnerships, unless an exclusion applies or a specific exception is noted.
→ Ensure you reduce your gross receipts by returns and allowances made during the year.
What does 'add-back' mean regarding ATI after 2024?
For tax years beginning after 2024, P.L. 119-21 allows an add-back to taxable income for any deduction allowable for depreciation, amortization, or depletion when calculating Adjusted Taxable Income (ATI).
→ Confirm the tax year starts *after* 2024 to utilize this change.
Does a C corporation owning a partnership need to file Form 8990?
Yes; any investment interest expense allocated to that C corporation is treated as business interest expense of the C corporation from a non-excepted trade or business.
→ Verify the specific allocation method used for the investment interest expense.
What must be done if my entity is a 'syndicate'?
A taxpayer defined as a "syndicate
(under section 448(d)(3)) is considered a tax shelter and is not permitted to use the small business exemptions contained in section 163(j)(3).
Confirm your status as a syndicate before applying the small business exemption.
Is there an exception for partnerships regarding disallowed interest carryforward?
Yes; Line 2 of Form 8990, which tracks prior year disallowed business interest expense carryover, does not apply to partnerships.
→ Double-check that you are not required to enter a value on Line 2 if the entity is a partnership.
Workflow map
Related forms and next steps
Before
Current
After
Often used with
⚠ If something goes wrong
- A pass-through entity must provide certain information upon request by an owner who needs it to complete their return.
Questions about IRS Form 8990
What is IRS Form 8990 used for?
This form determines how much of your business interest expense you are allowed to deduct in the current year. If you have more eligible interest expenses than this limit, the remaining amount is carried over to be used in future tax years. The calculation depends on your business income and specific financing details.
Who must file IRS Form 8990?
A taxpayer must file IRS Form 8990 if they are subject to the Section 163(j) limitation, unless their interest expense only comes from an employee service trade or business, electing real property trade or business, electing farming business, or certain regulated utility businesses.
What information does IRS Form 8990 require?
The form collects details in Part I (Computation of Allowable Business Interest Expense), which is completed first. It also includes Part II (Partnership Pass-Through Items) and Part III (S Corporation Pass-Through Items) to allocate excess items.
When is IRS Form 8990 due?
The source does not state a specific filing deadline date, but the amount on line 31 of Form 8990 is used on the taxpayer’s next year’s Form 8990, line 2 (unless the filer is a partnership).
Where do I file IRS Form 8990?
The instructions do not specify a service center address for submission. The form is associated with Catalog Number 71420E and can be filed electronically via IRS.gov.
How do I complete IRS Form 8990?
Taxpayers must first complete Part I to determine the allowable business interest expense. If applicable, a partner must complete Schedule A before completing Part I. The final amount from line 31 is then carried forward to the next year's Form 8990 (line 2).
What happens if IRS Form 8990 is filed incorrectly?
If the calculation on Form 8990 is incorrect, the business interest expense deduction allowed will be wrong, potentially resulting in an under-deduction or over-deduction for the tax year.
Do I need to file Form 8990 even if my business interest expense is zero?
A pass-through entity must file regardless of whether it has any interest expense, provided it allocates excess taxable income or excess business interest income. Check the filing requirement for pass-through entities first.
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